International Business: Meaning, Characteristics, Importance, and Overview of World Trade Organization

What is International Business?

International business can be defined as the exchange or transaction of goods and services between various countries. These transactions include the transfer of goods, services, capital, technology, and managerial knowledge to other countries.

Or you can say that international business involves the export and import of goods and services between countries. International business can also be termed as the global trade of goods and services.

In this article, we will go through the introduction to international business, its Characteristics, Importance and an overview of the World Trade Organization (WTO)


Characteristics of International Business

These are the following characteristics of international business. which are given below:

  1. Large Scale Operations
  2. Huge Investment of Money
  3. Stiff Competition
  4. Integration of World Economies
  5. Advantageous to Participating Countries
  6. International Restrictions and Regulations
  7. Sensitive

Large Scale Operations

In international business, all the activities are conducted at a very large or huge scale. The production, distribution and marketing activities are carried on at a very large scale.

Huge Investment of Money

Since the operations of the international business are carried on at a very large scale, the money or investment involved is also huge or big.

Stiff Competition

Many players such as individuals and companies are involved in international business. The competition to survive in the market is very keen and stiff. We have already discussed the aspects of competition in international business between the developed and the developing countries in the WTO regime.

Integration of World Economies

International business helps in integrating the economies of the world. This is because an international business uses finance from one country, labour from the other and technology from some other country.

It designs the product in one country, produces its parts in many different countries and assembles the product in another country. It sells the product in many countries, i.e. in the international market. This is the advent of globalization.

Advantageous to Participating Countries

Advantages in the form of capital formation, new technology, employment generation, industrial development etc are generated among the participants of the international business.

International Restrictions and Regulations

Doing international business is not easy. There are many inflows and outflow restrictions in this business. There are restrictions and regulations in the form of trade restrictions, foreign exchange regulations and tariff barriers in international business.

Sensitive

International business is very much sensitive. Change in economic policies, technology, political changes etc. has a direct impact on international business. As such international business is termed as very sensitive.


Importance of International Business

The importance of international business is discussed below:

  1. Helps in Earning Foreign Exchange
  2. Optimum Utilization of Resources
  3. Increases Competition
  4. Achieve its Objectives
  5. Betterment of Relationship
  6. Get benefits From the Government

Helps in Earning Foreign Exchange

International business transfers goods and services from one country to another. This in turn helps in earning a lot of foreign exchange for the participating countries.

Optimum Utilization of Resources

International business uses the capital and technology of rich or developed countries and raw materials and labour of poor or underdeveloped countries. Thus it helps in the optimum utilization of the resources available in various participating countries.

Increases Competition

International business helps in producing good quality goods and services at a very low cost. Thus international business gives a good competition to all the participants but it also gives competition to the domestic industries.

Achieve its Objectives

The main objective of an international business is to earn high profits. This objective can be achieved easily in the global context. This is because it uses the best technology. It has the best employees and managers. It produces high-quality goods. It sells these goods all over the world. All this results in high profits for the players in the international business.

Betterment of Relationship

Since international business involves many participating countries, it helps in improving and strengthening the relationship among the participating countries.

Get benefits From the Government

International business brings a lot of foreign exchange to the country. Therefore, it gets many benefits, facilities and concessions from the government. It gets many financial and tax benefits from the government.


Overview of World Trade Organization

The World Trade Organization was created in the year 1995, and it replaced GATT which was formed to help the world economies to recover from the after-effects of World War II. WTO came into existence during the Uruguay Round of GATT in which 123 countries participated. The WTO is basically an intergovernmental organization which regulates international trade.

Structure of WTO

The WTO has nearly 153 member countries and around 30 negotiating members. The WTO’s top-level decision-making body meets at least once every two years. Below this is the General Council which normally consists of the ambassadors and heads of delegation in Geneva and they meet several times a year in the Geneva headquarters.

At the next level, the Goods Council, Services Council and Intellectual Property Council report to the General Counsel. Numerous specialized committees, working groups or working parties deal with the individual agreements and other areas such as the environment, development, regional trade and membership applications agreements.

Objectives of WTO

The major objectives of WTO are stated below:

  • To improve and raise the standard of living of people in the member countries.

  • To ensure full employment and a broad increase in effective demand.

  • To increase the production and trade of goods among the member countries.

  • To increase the trade of services.

  • To ensure optimum utilization of world resources.

  • To give protection to the environment.

  • To accept the concept of sustainable development.

Functions of WTO

The main functions of WTO are discussed below:

  • Ensuring that the rules and provisions related to the trade policy review mechanism are properly implemented.

  • Providing a platform for member countries to decide and formulate future strategies related to trade and tariffs.

  • Ensuring that proper facilities and provisions are made and provided for implementation, administration and operation of multilateral and bilateral agreements of the world trade.

  • Administering the rules and processes related to dispute settlement.

  • Ensuring the optimum use of world resources.

  • Assisting international organizations such as IMF (International Monetary Fund) and IBRD (International Bank for Reconstruction and Development) in establishing coherence in universal economic policy determination.

FAQ

What is International Business?

International business can be defined as the exchange or transaction of goods and services between various countries. These transactions include the transfer of goods, services, capital, technology, and managerial knowledge to other countries.

What is the importance of international business?

1. Helps in Earning Foreign Exchange
2. Optimum Utilization of Resources
3. Increases Competition
4. Achieve its Objectives
5. Betterment of Relationships
6. Get benefits From the Government

What is World Trade Organization?

The WTO is basically an intergovernmental organization which regulates international trade.

what are the functions of WTO?

The main functions of WTO are discussed below:
1. Ensuring that the rules and provisions related to the trade policy review mechanism are properly implemented.
2. Providing a platform for member countries to decide and formulate future strategies related to trade.
3. Ensuring that proper facilities and provisions are made and provided for implementation.
4. Ensuring the optimum use of world resources.
5. Administering the rules and processes related to dispute settlement. etc.

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